Real Estate Appraiser Specializing in Commercial Industrial Residential Income Land & Single Family Residential Properties Existing or Proposed Construction Estate & Gift Tax Conservation Easements Partial Values Fractional Interests Former Senior Appraiser United States Treasury Department IRS Large Business and International Division California General Certified Real Estate Appraiser FHA Approved

Michael F. Ford #AG002512


Internal Revenue Service Publication 561

Determining the value of donated property

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CAUTION Appraisers and Users of Appraisals for IRS purposes:

You must be prepared to document and prove the specific methodology used to derive your individual appraisal adjustments. Claiming adjustments derived based upon “appraiser experience”, or “market estimate” will certainly be challenged.  Citing market participants and agents is usually acceptable, provided you maintain work files with the specific names and numbers of the individuals being cited. NEVER cite paired sales analysis unless you have the specific data in your files to back them up!

Publication 561 does not specifically point out or emphasize that the Fair market Value (FMV) definition to be used is only the one cited in the code section for this specific purpose purpose (non cash charitable donations). Refer to the ‘Value Definitions’ page within this site.

Fully fifty percent ‘plus’ of the appraisals that I reviewed, while with the IRS Large Business & International Division (LB&I), incorrectly used the traditional FNMA definition of market value instead of fair market value (FMV).  Several used the generic AICPA definition, or FMV as defined in other unrelated Treasury Regulations definitions & sections.

I was clear from reviewing residential, commercial, industrial and land valuations that many of the appraisers / valuators did few, if any, previous appraisals for IRS related purposes.

All readers are urged to resist the temptation to select your appraiser(s) based on the lowest fee quotes, and especially, upon the fastest promised completion time. They will be opposed by expert IRS appraisers who consistently rank in the top 2% to 3% of General Certified Real Estate Appraisers both nationally and regionally.  These same appraisers will typically have from six to twelve months to research the issue and prepare their reports.  If the amounts involved warrant, then twelve to eighteen months, and outside experts may be involved.

Can you really afford to defend against this kind of expertise, and all the resources available to federal agencies, with a “bargain appraisal” that was also performed in a hurry?

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